Plus500 has a sponsorship deal with Athletico Madrid, who Fernando Torres plays forDenis Doyle/Getty Images
A spreadbetting firm backed by top banks and hedge funds is in free fall right now after suspending an unspecified number of accounts while it carries out money laundering checks.

Shares in Plus500, which is based in Israel but listed on London's junior AIM market, are down 30% after the company posted a statement on its website saying client accounts have been frozen.

In the statement Plus500 said (emphasis theirs):

As an authorised financial institution, Plus500UK Limited has a regulatory obligation to comply with the UK Money Laundering Regulations 2007 and other rules and guidance which requires us — amongst other things — to identify and verify our customers, the nature and purpose of the business relationship and source of funds.

Whilst we understand the inconvenience this will cause, we have no alternative but to place a restriction on your trading account until such time as we have been able to undertake a complete review of the documentation and information we hold currently on you.

Until the review has been satisfactorily carried out, you will be unable to open any new trades on your account, deposit or withdraw funds. If you have any open trades you will, however, still be able to freely service your existing positions with additional Maintenance Margin, although again, will not be able to withdraw funds until the review is complete.

The Times reported last September that the UK's Financial Conduct Authority was investigating how Plus500 signs up new customers. At the time the company told the paper it was "fully compliant" with money-laundering rules.

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Plus500, which has a sponsorship deal with Athletico Madrid, lets ordinary people play the stock and currency markets through contracts for differences (CFD) and spreadbetting. Both are financial instruments that effectively let people bet whether the price of an asset will go up for down.

UPDATE

The company said around 55% of UK accounts have been affected and the freeze is due to the implimentation of tougher new anti-money laundering checks, which are taking longer than expected.

The company said (emphasis ours):

Plus500's UK subsidiary, Plus500UK Limited ("Plus500UK"), has in recent weeks been implementing certain enhanced client on boarding and Anti-Money Laundering (AML) processes which have resulted in additional documentation checks being required on existing and new Plus500UK customer accounts.

This has led to an increased volume of documentation being reviewed by our client onboarding team, and some Plus500UK customers are currently experiencing delays in receiving the necessary approval to open new accounts, and new trades on their existing accounts and / or withdraw monies.

Only the Plus500UK regulated business is impacted, and the Company will continue to offer its services to new and existing customers through its other regulated subsidiaries in Cyprus and Australia. Currently c.50% of Plus500's revenue is derived from Plus500UK, and c.45% of Plus500UK's customers have passed Plus500's electronic verification process and are therefore allowed to trade.

The company said it "has notified and is in close dialogue with the FCA" about the changes to its anti-money laundering review system. The FCA declined to comment on the case when contacted by Business Insider.

The update has failed to reassure investors — Plus500 shares are now down over 37%.

UPDATE 2

Plus500's press representatives have just responded to Business Insider's questions, giving more insight into what happened. Here's what they said:

How many Plus500 accounts have been suspended? Not disclosing this number, runs into thousands clearly.

Why were account holders not already properly vetted under the 2007 money laundering act? They were - mostly passed by electronic verification with documents subsequently provided and uploaded. This project has uncovered human error in terms of some documentation and how it was uploaded (some documents unable to be read).

How long is the review expected to take? Hundreds being verified per day, so a few days in some cases, may take a couple of weeks for others.